Private Infrastructure - Directs

Private infrastructure refers to investments made in private - i.e. not publicly held – infrastructure assets. Partners Group classifies Infrastructure into four broad sectors namely  Transportation (e.g. toll roads, airports, railways, seaports, bridges, ferries), Utilities (e.g. power transmission and distribution, oil and gas pipelines, water systems, waste collection and treatment, long-term contracted power generation), Communications (e.g. telecommunication towers, cable networks, satellite systems) and Social infrastructure (e.g. hospitals, schools, stadiums, prisons, courts, subsidized housing). 

Infrastructure assets are typically characterized by capital intensity, long economic useful lives, high barriers of entry into the markets they serve, relative inelasticity of demand for their services and a high degree of regulatory control. These features make the returns of this asset class defensive in terms of sensitivity to economic cycles and also provide a degree of inflation protection as many infrastructure assets benefit from index-linked tariff structures. Hence, private infrastructure investments contain a distinctive risk/return profile that makes this asset class ideal to enhance diversification of existing portfolios.

Private infrastructure investments exhibit different risk/return profiles depending on the maturity stage of the asset. Private infrastructure investment can mainly be split into three different stages namely Brownfield (investments made into existing, mature assets characterized by stable cash yields and a low risk profile), Rehabilitative brownfield (investments target a combination of cash yield and capital appreciation by focusing on re-positioning, upgrading and/or expanding existing assets) and Greenfield (investors target substantial capital appreciation by investing in the new development of infrastructure assets).

Example – private infrastructure direct investment (Newcastle Coal Infrastructure)


Project. The Newcastle Coal Infrastructure Group (NCIG) has approval from the New South Wales Government (Australia) to build and operate a new Coal Export Terminal (“CET”) with capacity of up to 66 million tons p.a. The CET is strategically located in the Port of Newcastle which services major coalfields in New South Wales. The first stage of the terminal opened in May 2010 and will have a capacity of 30 million tons p.a when fully commissioned.

Investment case. Due to the demand for additional coal loading capacity from New South Wales export producers and growth prospects in the thermal coal markets of Asia Pacific, NCIG intends to expand the capacity of the CET to 53 millions tons p.a. Partners Group provided a subordinated debt financing to NCIG to support this second  development stage of new export capacity. From a risk/return perspective, the subordinated debt tranche offers attractive terms with strong downside protection due to secure revenue streams which are based on long-term (ten year evergreen) “ship or pay” agreements  (a buyer agrees to pay for contracted transportation capacity regardless of actually transported volumes) from long-life source mines.

Return. Partners Group expects to generate a double digit cash yield over the investment period.

Benjamin Haan Private Infrastructure
Nick ap Simon Head Dubai
Michael Barben Co-Head Private Infrastructure
Dmitriy Antropov Private Infrastructure